In a significant ruling, the Supreme Court of India dismissed the appeal filed by N.M. Theerthegowda against the imposition of a tenfold penalty on deficit stamp duty for an unregistered agreement of sale. The bench, comprising Justice Hrishikesh Roy and Justice S.V.N. Bhatti, upheld the decisions of the lower courts, emphasizing that the provisions of the Stamp Act leave no room for discretion when it comes to imposing penalties.
Background of the Case
The appellant, N.M. Theerthegowda, had filed a suit (O.S. No. 610 of 2015) seeking specific performance of an agreement for sale dated November 4, 1996, allegedly executed by the respondents Y.M. Ashok Kumar and others. Additionally, the appellant sought to set aside a subsequent sale deed dated August 13, 2003, executed by the first and second respondents in favor of the third respondent.
During the trial, the appellant claimed possession of the disputed property under the 1996 sale agreement. The trial court, however, noted that the agreement was executed on stamp paper worth only Rs. 200, while the law required ad valorem stamp duty, given that the sale agreement also involved possession transfer.
Key Legal Issues Involved
The primary legal issue in this case was the applicability of the Karnataka Stamp Act concerning the deficit stamp duty and the appropriate penalty to be imposed on such documents. The appellant contended that only the deficit stamp duty should be collected, and the penalty imposed was erroneous.
The trial court, citing precedent from the Karnataka High Court’s decision in Degambar Warty vs. District Registrar, Bangalore Urban District and another (ILR 2013 KAR 2099), ruled that the Civil Court had no discretion to impose a lesser penalty and mandated a tenfold penalty on the deficit stamp duty, amounting to Rs. 14,38,000, in addition to the deficit stamp duty of Rs. 1,43,800, totaling Rs. 15,81,800.
The appellant challenged this decision in the Karnataka High Court through Writ Petition No. 36970 of 2015, arguing that the penalty was illegal. However, the High Court upheld the trial court’s decision, leading to the present appeal in the Supreme Court.
Supreme Court’s Observations and Decision
The Supreme Court, in its judgment delivered by Justice S.V.N. Bhatti, concurred with the lower courts, stating that under Section 34 of the Karnataka Stamp Act, an improperly stamped document could not be admitted in evidence unless the deficit stamp duty and a tenfold penalty were paid. The court observed:
“Every person authorized to collect deficit stamp duty and penalty has no discretion except to levy and collect ten-times the penalty of deficit stamp duty.”
The Court also clarified the procedures under various sections of the Stamp Act, including Sections 33, 34, 35, 37, and 39, highlighting that while parties could choose to approach the District Registrar for the determination of the deficit stamp duty and penalty, once the court had taken cognizance under Section 34, there was no option but to impose the tenfold penalty.
The Court further noted that the appellant, having initially agreed to pay the deficit duty and penalty, could not now seek to invoke the provisions under Section 37(2) of the Act to avoid the tenfold penalty.
Case Details:
– Case Title: N.M. Theerthegowda vs. Y.M. Ashok Kumar and Others
– Case No: Civil Appeal No. 10038 of 2024 [@ S.L.P. (Civil) No. 19165 of 2021]
– Bench: Justice Hrishikesh Roy, Justice S.V.N. Bhatti
